Turkish Markets Morning Report: For Whom the Bell Tolls?
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Geopolitical tensions and interest rate expectations continue to shape sentiment in Turkish markets. After a sharp selloff driven by the Syria conflict, equities staged a powerful rebound amid renewed hopes for rate cuts. Globally, investors are watching the EUR/USD technical breakdown, Japanese inflation trends, and the continued rally in crypto and precious metals.
Turkish Equities Rebound Strongly After Geopolitical Selloff
After tumbling earlier this week due to rising tensions in Syria, Turkish stocks rebounded sharply on Thursday. The BIST 100 index surged by 2.5%, erasing all weekly losses and extending its winning streak to a potential fourth week.
The banking sector index (XBANK) rose 4.2%, fueled by speculation that the Turkish Central Bank (CBRT) could resume rate cuts despite earlier signs of caution.
Rate Cut Expectations: 250 or 350 Basis Points?
A BloombergHT survey shows market participants expect a 250bps rate cut at the July 25 policy meeting. However, the report suggests a surprise 350bps cut may still be on the table.
Such a move would reduce the policy rate from 46.0% to 42.5%, restoring symmetry to the interest rate corridor.
Bond Yields and Exchange Rate Signal Policy Shift
The benchmark 2-year government bond yield fell by 25bps to 41.37%, while Turkey’s 5-year CDS remained steady at 293bps, within a tight recent range.
The USD/TRY exchange rate remained within the CBRT’s comfort zone, hovering around 40.22, with a mild uptick to 40.30 due to settlement effects.
Housing Market Data: Sales Up, Real Prices Still Negative
According to TurkStat, home sales in June rose 35.8% YoY to 107,700 units. However, mortgaged sales declined, and foreign buyer activity remained below historical averages.
The CBRT’s housing price index showed nominal annual growth of 32.8%, but real prices declined by 1.7% after adjusting for inflation. Price gains were strongest in Ankara (+42%), followed by Istanbul (+33%) and Izmir (+32%).
U.S. Markets Rally on Earnings and Retail Data
The S&P 500 and Nasdaq hit new record highs, driven by upbeat earnings — notably from Netflix — and strong retail sales data, which rose 0.6% in June, beating expectations.
Meanwhile, initial jobless claims dropped to a three-month low, reinforcing optimism about economic momentum. However, expectations for a July Fed rate cut remain low, with only 44bps of total cuts priced in by year-end.
EUR/USD: Technical Breakdown in Focus
The EUR/USD pair has retreated more than 2% from its July highs of 1.18, dipping to 1.1560 — a key support level.
Earlier in the year, Trump’s unpredictable policies prompted temporary dollar weakness and euro strength. But recent U.S. tariff revenues, policy divergence, and the potential continuation of Jerome Powell as Fed Chair have revived dollar bulls.
A weekly close below 1.1560 could trigger a larger correction and mark the return of the “King Dollar.”
Japan: Inflation Persists, Political Risk Rises
Japan’s core inflation eased to 3.3% in June, remaining well above the BoJ’s 2% target for the 39th consecutive month. Food inflation surged to 8.2%, and service prices continued to rise.
All eyes are on this Sunday’s upper house elections, where PM Ishiba’s ruling coalition is expected to lose its majority. This could complicate trade talks with the U.S. and raise concerns about Japan’s public debt sustainability.
Crypto and Silver Rally into the Weekend
Bitcoin surged back above $120,000, setting up for its highest weekly close ever. Meanwhile, silver appears set to end the week with a strong gain.
In Washington, the House passed a stablecoin bill requiring full backing by liquid assets and transparency in reserves. The legislation, seen as crypto-friendly, now heads to President Trump.
Today’s Agenda: U.S. Housing, Confidence, CBRT & BDDK Data
Markets will watch for U.S. housing starts and building permits, along with the University of Michigan consumer sentiment index.
Domestically, weekly CBRT and BDDK data will be released.
Source: Emre Degirmencigolu, Kıbrıs İktisat Bankası